Dear Rica, How do I budget for out-of-pocket expenses?

Posted on December 4, 2016 in News

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Dear Rica:

We want to rent an apartment around Kobe, but are concerned about how much money we need to budget for. Can you give us the scoop on this?

Confused in Kansai

Dear Confused,

Your confusion is very understandable. A tenant’s initial out-of-pocket expenses can add up pretty quickly. Below is a short list of fees that a tenant may need to pay before moving in. However, they can vary based on the location and type of apartment, so be sure to check with the landlord or real estate agent.

  1. First month’s rent—You will need to pay the first month’s rent before moving in. After that, you will need to pay the rent in advancebefore the last day of the current month for the next month’s rent. In other words, you must pay February’s rent by January 31. Rent is generally calculated from the date your lease starts, not when you move in.
  1. Deposit (敷金 shikikin)—You must pay one to two months’ rent when the lease is signed. The landlord holds the deposit to cover unpaid rent or repair costs. The landlord must return the deposit at the end of the lease, minus cleaning and repair costs.
  1. Guarantor fees (保証金 houshokin)—This is a kind of secondary deposit equal to one to two months’ rent. It covers pretty much the same thing as the shikikin deposit and is refundable (less costs for repairs, etc.). Japanese relatives or employers are favored as guarantors; however, the required use of guarantor companies is on the increase. This deposit is refundable (minus cleaning and repair costs). Typically, a renter is asked to pay either the shikikin deposit or the houshokin guarantor fees, but not both.
  1. Guarantor company’s fee—This is a fee paid to a company that acts as your guarantor in lieu of an individual guarantor. The guarantor will need to sign your lease application. The guarantor company’s fee is generally half of one months’ rent to join and a JPY10,000 renewal fee each time you renew the lease.
  1. Key money (礼金 reikin)—Otherwise known as “thank you money”, this is non-refundable gratuity of one to two months’ rent paid to the landlord. Expensive properties tend to require higher deposits and higher key money, while the deposits and key money for studio-type properties are on the lower end.
  1. Real estate agent’s commission—This is the fee you pay for your real estate agent’s services, usually one months’ rent plus consumption tax.
  1. Renter’s fire insurance—You will need to get fire insurance that covers your apartment for the term of the lease. A 2-year policy generally costs ¥20,000, and will need to be renewed each time you renew your lease.
  1. Common area maintenance fees/management fees(共益費 kyouekihi or管理費 kanrihiThese are fees for the maintenance of a building’s common areas, such as landscaping, elevators, etc. They are common in largish apartment buildings and complexes and, though often paid by the landlord, may be passed on to you as part of your rent. The amount is calculated based on the size of the apartment; the larger the apartment, the higher the fees.
  2. Lease Renewal Fee—Most residential leases are for an initial 2-year period. Most require a renewal fee. If you know you want a longer term, try to negotiate the deletion of this clause from your lease.